Key takeaways of the call

Economy severely affected due to complete lock down in April and partial lock down thereafter and resultantly the consumer spending was limited to essentials (FMCG & Durables). Domestic kitchen and home appliance demand was encouraging as people were stuck at homes. Movement of non-essential goods faced difficulties even after partial easing of lockdown.

Growth severely affected by the Covid-19 Pandemic. More than half of the quarter was lost due to lockdown. Even after partial easing of lockdown, less than 60% of market was open for trade for company's products. However in comparison to the Covid sensitive budget of the company the actual sales is better.

With less than 2/3^rd of the channel outlets opened, the monthly sales in June 2020 was in excess of 90% of sales of June 2019. Thisshows the existing channels that are opened are doing sales better than last year. Once the balance about 1/3^rd of channel network also openes the company is well set to take advantage.

After lockdown is over, there is surge in demand for electrical appliance such as mixer grinder, baking products, gas stoves & cleaning products as well non-stick cookware. So product mix has changed a bit and expected to back to old level soon.

Manufacturing activities started in all locations since Mid May but operating at 60% of pre-covid levels. In July 2020 the overall capacity utilisation further improved to stand at 80%. The company is operating at 100% utilisation in the cookware segment. The company is able to operate multiple shift in its factories. This helps the company to able to keep the supply chain going.

Company's dependence on migrant workmen is minimal and adequate human resource is available to increase production at short notice. However component supply chain was severely impacted due to total lock down of key manufacturing locations as well as liquidity & labour issues.

Exports revenue in Q1FY21 declined 7% YoY to Rs 12.0 crore. Category wise, 90% of exports is cookware. However export business appears to be more promising than FY20. Witnessing consolidation of export customers, which will improve exports going forward.

The company that had ended FY20 with internal inventory has optimised and controlled the inventory. As the factories are opened up only in May 2020, the pent up demand was catered by the internal inventory and once the factories are opened the supply to channel was met by the production. The inventory at channel level has reduced but healthy.

Large format sales was affected due to lock down of outlets.

Less than 60% of the addressable market was available for sale in Q1FY21. In the markets which are open, the trend in sales in July was encouraging and growth was significant.

Introduced 38 new SKUs in Q1FY21. The company has also launched an full scale exchange offer scheme during the quarter. The company has advertised in all media modes in Q1FY21 and the advertisement spend was about 4% of the revenue in Q1FY21 compared to about normal 6.5%. Going forward Advertisement Spend will be qual to FY20 levels.

Swachh range of pressure cookers received good response across all markets. Appliance sales was more significant; Cleaning Solutions category have done very well.

Revenue of cleaning products in absolute terms in Q1FY21 was higher than that of Q1FY20. Higher Q1FY21 cleaing products revenue is despite loss of about 1.5 months of sales during the quarter.

Company followed a cautious primary billing policy given the 'tight liquidity' situation in trade E-commerce, General Trade and Prestige Xclusive Channels were more buoyant.

In Q1FY21, Institutional, Modern Format and Direct Rural channel remained dormant due to Covid pandemic. While large format channel was completely out of action due to lock down and general trade was switching between full or partial lockdown as per state directives, E-commerce was the most active channel.

Optimistic about H2FY21. Second half is expected to be equally good compared to last year even not better. Moreover unlike last year Diwali falls in the month of November thus shifting the benefit of festival demand to second half.So demand is not going to be an issue but functioning of touch points/outlets to capitalize on it is.

Rural demand was mixed depending on categories. While the demand/sales at Tier 4 cities/towns are robust, the sales through Micro Financial Institutions (MFIs) are subdued. MFIs due to moratorium on their loans have not opened their loan books yet thus hurting the demand from than channel. Loans from MFIs are expected to roll in one or two months that will result in pick up in demand in rural. Active south-west monsoon has improved sowing coverage but certain regions are severly affected by floods that is a concern.

Did not resort to any pay cut and paid full remuneration to all during the entire lockdown period

Prestige Xclusive chain strength stood at 590 contributing significantly to total sales.

Prestige Lifestyle -a new retail format- opened 2 stores in Bangalore.

Given the 'trade liquidity' concerns, company followed a cautious policy on primary sales.

Alternate arrangements to substitute imports from China progressed satisfactorily. Currently dependence on Chinese imports is less than 10%.

The company continues to carry substantial free cash in excess of Rs.300 crores post capex and investments in UK subsidiary.

The company has not held back payment of salary or salary. But managed to bring down breakeven levels with efficiency improvements and other ocst reductions measures.

All vendors have been paid within due dates and supply chain remains largely comfortable in spite of lock down in some industrial belts

The new normal of working from home augurs well for kitchen and home appliance business. With people on going out there is an increase in disposable income to spend.

Company has rejigged its sales and distribution strategy to cope with new challenges posed by Covid-19 Company has put in place various programs to improve efficiency and lower the break-even point

Ecommerce surged ahead ever since the Covid lockdown started.

Contribution of e-commerce gone up over 25% from about 10-11% with fear of going out.

On the input cost front, the company expects aluminium prices to remain flat while stainless steel may experience marginal inflation. However, the company believes that a price hike would not be required in the near term.

At retail front there is no structural change in case of Cookers with sales of it being good. The company is maintaining its market share in cookers even though it has not improved it. Hope the dealer billing and retail billing will catch up soon in one or two months.

Company has a positive outlook for the remaining period of FY 21, subject to further easing of lockdown conditions.